Social business is a business that is aimed at addressing a social cause. The investment made by the investors is entirely with a vision of contributing to the social welfare and not profit entirely. The investor may however get back his money after a certain time and cover all the operational costs of the organization.
Although social business may be carried out in any area but sectors like healthcare, housing, nutrition, education, financial services to the poor and the down trodden remain the priority.
Unlike profit making organizations, success in the field of social business is governed by the amount of impact it is able to create or the positive change it has been able to bring in the existing scheme of things.
As mentioned earlier, profit takes a back seat, but organizations into social business are not necessarily disallowed to make profits. Sustainability after all, of both the organization and the investor, is important and profit makes it possible.
There is essentially, but, a cap on the amount of profits the organization can make and the profits are to be utilised in the business again. Generally, social businesses cannot make profits in excess of the actual investment.
In fact in Social Business, the line between profitability and social contribution is very difficult to maintain and it often so happens that social businesses become profit making organizations after a few years of operation. It therefore calls for renunciation of the corporate ways of thinking, because what may start as a mole may end up becoming a mountain, 5 – 6 years down the line.
The term social business is often confused with social enterprise. Both are similar in many ways, yet distinct in others. In fact social business may be called as a component of social enterprise or one of the ways by which a social enterprise expresses itself.
Moreover a social enterprise may receive funds from people, through grants or from the government, a social business cannot.
The concept of Social business was given by Muhammad Yunus, who essentially presented as an alternate model to capitalism. It was meant to overcome the shortcomings and failures of capitalism that focuses only on profit making and ignores or fails to address other sides of business.
He created a new system where profit making and social businesses exist simultaneously. Also, the social businesses are not prevented from making profits. They are however not allowed to take dividends and reinvest the money earned as profit in the business to scale operations and give maximum benefit to maximum people.
As opposed to devising means to alleviate poor or a trickle down economic system to alleviate the poor, the concept of social business emphasises an action based system where the poor participates in his/her growth. Prof.
Muhammad Yunus used this to create Grameen Bank and disburse money to poor in the form of micro – credit without the condition of giving a property or asset as mortgage. This created opportunity for the poor and allowed for his participation in the free market thereby relieving him of the handicap of relying on the government for grants.
Finally there are two types of social businesses.
- The first type is the one that purely exists for tackling a social problem.
- The second type is the one that is owned by the poor and can make profits. The profits can then be distributed between the poor (those who run the business).
